Soon after I started in real estate in 2005, I heard Richard Wagman, W’91, speak at a conference. He had great insights and was also funny and approachable. Over the years, we have kept in touch, and he has been a great mentor, especially after I started my own company in 2014. Plus, his firm Madison Capital, with a portfolio of 21
assets under management in New York City, had accomplised average IRRs exceeding 25% through 3 real estate cycles! I thought other Wharton alumni can benefit from his knowledge and advice.

Did you choose real estate right out of Wharton?

I graduated in 1991 from Wharton. In college, all of my peers were excited about securities analysis and statistics, and I was always more interested in bricks and sticks. My friends would go to hear John Reed, then Chairman of Citibank and Robert Rubin, then CEO of Goldman Sachs; I went to see the retail and real estate icons of our industry, people like Sam Zell, Sam Walton and Jerry Speyer. I was inspired to go into a business that you could touch and feel and have a direct impact on its success or failure. Instead of buying stocks in IBM or Starbucks, I would rather redevelop a building and lease it to a Starbucks or IBM.

How did you start in real estate?

I started by doing internships during my college years. First, I did an internship at my family business, which owned some small industrial buildings in Montreal — demolishing interiors. Then I worked for a ‘super’, who was in charge of fixing and furnishing a hotel. I still remember his name, Aurelio. He would constantly yell at me to work faster and smarter. He would make me go up 20 floors, assemble the beds for each room and then run down to get more boxes. We did 325 rooms, with two double beds in each room.

I got progressively more interesting jobs over the summers. In my junior year, I worked for the Yarmouth Group, which was a predecessor of Lend Lease Corp., and an institutional real estate advisor for public and private pension funds.

In order to get that job, I sent out 125 resumes to basically all the members of the Zell/Lurie Real Estate Center at Wharton. I got over 100 rejection letters (I posted those on my wall for inspiration). One morning, I got a random call at 7 a.m. and was asked to get to New York City within three hours. I got an offer to help open Yarmouth’s Paris office (the interviewer had noticed that I spoke French). It turned out to be an amazing opportunity.

I worked with a managing director of the company — I did everything, from programming phones, opening boxes, setting up the office, to arranging meetings with CEOs of major French companies.

After graduating, I worked for a year in Yarmouth’s New York office, and then moved to Paris to help make that office a success, and finally to London where the company opened another office. I left in 1994 and started my own company.

What was the urge to be an entrepreneur?

One of the most enjoyable parts at Yarmouth was setting up and building a new business. I did it twice. So my biggest rush early in my career was getting things done from the ground up. I moved back to New York and worked with a German partner and established a company, Principal Property Group LLC. It was 1994, the depths of the real estate downturn in New York. We ran the business from a living room in our shared two-bedroom apartment, and we slowly grew it until we owned just under a million square feet of Class B (above average) office buildings with retail at the base. Within a few years, we sold a portion of the portfolio to a public REIT called Corporate Office Property Trust.

How do you buy 1 million square feet in a few years?

Real estate is all about becoming an expert — once you buy a building, you get to know the neighborhood and your market. You get to know the neighbors and the opportunities. So we bought one building, and another across the street, and then in a neighboring area. Subsequently, we bought a small portfolio in Montreal. It was working off of our new market expertise and past job experiences in execution that enabled us to grow the business. At Principal Property Group, we started with high-net-worth investors and then moved on to family offices. Later in my
career, we worked with larger institutions as investors such as Fortress Investment Group, Goldman Sachs, AT&T Pension Fund, J.P. Morgan Investment Management and Prudential Insurance Company.

How did you start Madison Capital?

There were three of us who started the company, and we had three desks and three phones. We started it in 2002 and had a business plan — our focus was to acquire value-added High Street retail assets in high-barrier-to-entry markets like Manhattan. We felt it was an underserved asset class, particularly in the institutional real estate market. You have limited supply and significant demand from retailers to be in prime areas. We focus on large gateway cities, such as New York and Chicago. We initially made equity investments with friends and family as investors — our first acquisition was a $15 million asset. Then we did $25 million, $50 million, $100 million and $200 million. And our financial partners became larger and larger institutions over time.

What facets of real estate do you find most exciting? Are there any deals at Madison Capital that turned to be more challenging than you expected?

What excites us is to own assets in evolving neighborhoods so that we can in some way shape these neighborhoods or at least help in the progress. So when we see a trend or a driver of change, we try to capitalize on it. Being part of the history and the evolution of these neighborhoods is both motivating and humbling. We recently acquired a portfolio of buildings in the meatpacking district in Chicago, and the owner was a meatpacker. The owner is still operating his business, still slaughtering animals in the building. There was blood in the hallways as we toured the building. We saw a change in the fabric of the neighborhood, with a newly built Soho House Hotel down the street, an Ace Hotel being built in the neighborhood and Google taking 360,000 square feet across the street from our project. We looked at who the right tenants are today and who the right tenants will be five years from now and how to position our buildings to exploit these opportunities.

On the other hand, you can miss the boat. You want to be on the leading edge, but not on the bleeding edge of these opportunities. We were too early on the Lower East Side. We invested in Delancey Street between Allen and Eldridge Streets when the Seward Park/Essex Crossing was being talked about, but long before the project got off the ground. We decided not to wait and sold the property three years ago. It will take another five years for the neighborhood to mature. While this is a humbling experience, we learn from these mistakes.

Did you make Madison Capital different from the previous companies you started? If yes, how?

We try to learn from our past experiences. We have grown this company in fits and starts. In 2009, we had to look at the business and reinvent ourselves. We took advantage of the opportunity and tripled the size of our portfolio in 2010 and 2011. It was challenging — some of our investors were no longer active in the market, and a partner of ours left the company. We analyzed our model and concluded that we had the right approach to High Street retail. That gave us the conviction to acquire more of it from 2010 to 2012 when most companies were afraid to act. Our team is great — great professionals who bring creative ideas to the table. Building a strong team and also building relations with partners are aspects of the business that I love — whether with institutional partners, brokers or lenders. It is a very important and enjoyable part of the business — knowing and respecting each other. If you can build these relationships over time, you will be very successful.

Any interesting buy at that time that you can mention?

Yes, we bought an asset at 100 Broadway, which was 60% leased at the time. Downtown was a different market in 2010,
World Trade Center was under construction as was a lot of infrastructure, but nobody wanted to be there. We improved occupancy in the building and terminated Borders, the retail tenant for a nominal sum. Many people expected Borders would bankrupt and were saying “just wait them out.” But we wanted to control our destiny. So we bought Borders out, saved 12 months, and then released the space to two great-credit tenants that served both the building and the neighborhood (and tripled the retail income). We try to be proactive with our entire portfolio
— we don’t wait until a tenant is three months in arrears with the rent to initiate a conversation. We were the only landlord in New York City to pay Borders to leave, and we are happy we did it.

How can you sum up the benefits of Wharton for your career?

The business is really about people and relationships, and the longer you stay in the business and cultivate these relationships, the better you will do — both from a personal perspective and business perspective. There are people I do business with who went to Wharton with me 25 years ago. There are people I bounce ideas off who had interviewed me during college. There are also young associates who come up with ideas that are new and creative. Fraternity brothers at Penn, bankers or attorneys who have come out of Penn. I also make cold calls to chairmen of companies, who are Wharton alumni, and they pick up the phone and give you advice that is not self-serving. And I know the Wharton Club has the Take the Call campaign, which is great!

I try to help students coming out of the Wharton undergraduate and MBA programs with guidance and suggestions. We like to help people starting their own businesses because we have been there and want people to succeed in our industry. Getting to know people and treating them with respect from early on is very important. The people who start now can be partners of yours or maybe on the other side of the table one day. Having decency and respect goes a long way.

Who else do you seek as a sounding board?

Our partners at Vornado and Related or even competitors. We are extremely fortunate to work with great people, and we often bounce ideas off them. But this is not all — you have to be open to fresh ideas. I get great advice or different points of view from junior team members in our office, lawyers and bankers, as well as others in different industries, such as investment bankers, private equity investors and hedge fund folks.

Finally, what interesting books have you read recently?

Both my parents are Holocaust survivors, so I spend a lot of time reading history books. I read books about the Holocaust from the German, Polish and Jewish perspectives. This topic is an integral part of my life.